NEW YORK — A key gauge of the U.S. economy posted its largest monthly decline in almost six years in September as the terrorist attacks in New York and Washington further eroded already shaky business conditions.

        The New York-based Conference Board said Monday that its Index of Leading Economic Indicators fell 0.5 percent, to 109.2, in September, meeting analysts' expectations. The reading follows a revised 0.1 percent drop in August.

        “It just confirms what we know has been the fallout from the terrorist attacks,” said Gary Thayer, chief economist of A.G. Edwards & Sons Inc. in St. Louis.

        The decrease in the September index is the largest since January 1996, the board said, adding that the reading mirrors a significant slowdown in the manufactur ing and service sectors.

        The drop in economic demand will likely be reflected in a future decline in the numbers of manufacturers' new orders and housing permits, said board economist Ken Goldstein.

        The index indicates where the overall U.S. economy is headed in the next three to six months. It stood at 100 in 1996, its base year.

        Analysts expect the economic slump — which started well before hijackers crashed

        commercial jets into the World Trade Center and the Pentagon on Sept. 11 — to last until next year.

        “Is the worst yet to come? Yes.” said Diane Swonk, chief economist at Bank One Corp. in Chicago. “We still have to pay the price of all the layoffs that just got dumped on the economy.”

        But Dan Laufenberg, chief economist at American Express Economic Advisers in Minneapolis, said he thought the economy could start to mend as early as the first quarter of next year.

        The $40 billion emergency spending package approved by Congress immediately following the attacks could help rouse the economy in the next few months, potentially offsetting some private sector losses, he said. The House of Representatives also is considering a $100 billion stimulus package to keep the economy afloat.

        “I think we'll be surprised by how strong the economy is likely to be,” Mr. Laufenberg said.

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